In details discuss the inclusiveness of including all income

In details, discuss the inclusiveness of including all income on a tax return in the US.

In details discuss the implied limits on deductions when no deductions are allowed unless specifically allowed in the code in the US.

Solution

IN US Tax Laws two types of tax payers are eligible to file return. One is resident and other one is non-resident.

Residents: Under US domestic law, a resident is defined as an individual who either is a lawful permanent resident (the “greencard” test), or meets the “substantial presence” test.

An individual who meets the substantial presence test is an individual who has been present in the United States for at least 31 days in the current calendar year and an aggregate of 183 days during the current and two preceding years, counting all the days of physical presence in the current year, one-third of the days in the first preceding year, and one-sixth of the days in the second preceding year.

NON- Resident

Person other than Resident is Non- Resident as per US Tax Laws.

Residents

There are four types of tax status that may apply to a resident:

Each filing status is subject to a different graduated tax rate scale. The tax rates for 2018 are shown in the tables on the next page. A couple will be considered to be married for U.S. federal tax purposes if they were legally married in a jurisdiction that recognizes their union and that marriage is recognized by at least one U.S. state, territory or possession, regardless of the couple’s domicile.

Income tax tables for 2018

Income Tax Tables for 2018

Taxable Income Bracket

Filing Status

Tax Rate

From USD

To USD

Percent

Married filing jointly

0

19,050

10

19,051

77,400

12

77,401

165,000

22

165,001

315,000

24

315,001

400,000

32

400,001

600,000

35

600,001

No limit

37

Married filing separately

0

9,525

10

9,526

38,700

12

38,701

82,500

22

82,501

157,500

24

157,501

200,000

32

200,001

300,000

35

300,001

No limit

37

Head of household

0

13,600

10

13,601

51,800

12

51,801

82,500

22

82,501

157,500

24

157,501

200,000

32

200,001

500,000

35

500,001

No limit

37

Single

0

9,325

10

9,526

37,950

12

38,701

91,900

22

82,501

191,650

24

157,501

416,700

32

200,001

418,400

35

500,001

No limit

37

Filing Status

Single

Married Filing Jointly

Married Filing Separately

Head of Household

0% if taxable income is less than

$38,600

$77,200

$38,600

$51,700

15% if taxable income is less than

$425,800

$479,000

$239,500

$452,400

20%if taxable income is over the above amount

It is generally more beneficial for married taxpayers to file using the status ”married filing jointly” versus ”married filing separately.” However, married individuals wishing to file a joint tax return generally may not do so if either spouse is a nonresident at any time during the tax year. Certain elections may be available to allow a married couple to use the married filing jointly status when one or both of the individuals is a nonresident during part of the year.

A taxpayer may also be subject to an alternative minimum tax. The alternative minimum tax is payable to the extent it exceeds an individual’s regular tax liability. The alternative minimum tax is figured using lower rates, but allows fewer deductions.

Taxable Income includes

Other Income

Expenses deductible

General Deductions

Filing status

2018
USD

Married filing jointly and surviving spouse

24,000

Married filing separately

12,000

Head of household

18,000

Single

12,000

Taxes You Paid

Interest You Paid

Income Tax Tables for 2018
Taxable Income Bracket	Filing Status	Tax Rate
From USD	To USD		Percent
Married filing jointly
0	19,050		10
19,051	77,400		12
77,401	165,000		22
165,001	315,000		24
315,001	400,000		32
400,001	600,000		35
600,001	No limit		37
Married filing separately
0	9,525		10
9,526	38,700		12
38,701	82,500		22
82,501	157,500		24
157,501	200,000		32
200,001	300,000		35
300,001	No limit		37
Head of household
0	13,600		10
13,601	51,800		12
51,801	82,500		22
82,501	157,500		24
157,501	200,000		32
200,001	500,000		35
500,001	No limit		37
Single
0	9,325		10
9,526	37,950		12
38,701	91,900		22
82,501	191,650		24
157,501	416,700		32
200,001	418,400		35
500,001	No limit		37